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Weekly Commodities ETF Report: Crude, Gold Close Week Higher on Upbeat Sentiment Following Phase One Trade Deal

(MT Newswires) – Crude rose to the highest level in three months early Friday on optimism after a partial “phase-one” trade deal was announced in which China failed to commit to a specific dollar amount of purchases and the Trump administration removed the threat of any new import tariffs on Sunday. The Office of the United States Trade Representative said in a statement that the US will be maintaining 25% tariffs on about $250 billion of Chinese imports while reducing tariffs on $120 billion in products to 7.5%. The phase-one deal also includes a commitment by China that it will make “substantial additional purchases” of US goods and services in the coming years. China hasn’t committed to President Donald Trump’s key demand for about $50 billion of agricultural imports, with trade officials reportedly saying that such a move would land it in conflict with other trade partners. Vice Minister for Agriculture & Rural Affairs Han Jun confirmed the country would increase its purchases of agricultural goods but declined to specify how much, a report from CNBC said. “We will begin negotiations on the phase Two Deal immediately, rather than waiting until after the 2020 Election,” Trump said in a Twitter message.

Oil prices also firmed on Thursday, with the Organization of the Petroleum Exporting Countries (OPEC) predicting the oil market will be slightly undersupplied next year, though the International Energy Agency (IEA) begged to differ, predicting in its monthly outlook that new non-OPEC supplies will result in overproduction of 0.7 million barrels per day in the first quarter. OPEC and the IEA had different narratives in their monthly oil reports, with the IEA forecasting that 2.1 million barrels per day of new non-OPEC production will oversupply the market despite the production cuts from OPEC, Russia and Saudi Arabia. However, OPEC sees slightly lower growth outside of the cartel and a slightly undersupplied market in 2020.

Meanwhile, the US Energy Information Administration said commercial crude oil inventories increased by 0.8 million barrels for the week ended Dec. 6, up from the previous week.  US crude oil inventories are now 4% above the five-year average for this time of year. This compares with the American Petroleum Institute’s report that crude supplies rose by 1.4 million barrels. Analysts surveyed by S&P Global Platts were projecting a decrease of 2.8 million barrels.

Finally, the US weekly oil rig count rose by four to 667, the first weekly increase in eight, according to data compiled by energy services firm Baker Hughes (BKR). The combined oil and gas rig count in the US was flat at 799 as gas rigs were down by four to 129 during the week that ended Dec. 13.

Light, sweet crude oil for January delivery rose 1.19% for the week, settling at $59.18 per barrel at the end of Friday’s session. In other energy futures, gasoline was up 0.56% over the last five days and settled at $1.63 per gallon on Friday. Natural gas was down 1.87% for the week, ending Friday at $2.33 per 1 million British thermal unit.

The SummerHaven Dynamic Commodity Index Total Return Index (SDCITR) rose 2.09% for the week, compared with an increase of 1.37% in the prior week.

Gold ended Friday higher at $1,472.30 and the week up 1.10% even as the US dollar declined, as positive sentiment returned after the US and China trade deal was announced and as the Conservative party secured a victory in the UK elections, ending uncertainty over whether the country would proceed with Brexit since the party campaigned on leaving the European Union. The yellow metal often sees declines when geopolitical turmoil eases and investors are more likely to bet on riskier assets.

Copper prices slipped lower during Friday’s session, ending at a settlement price of $2.80 but closed the week 1.26% higher, also due to optimism for the interim trade deal between the US and China.  The red metal sank lower earlier in the week after Fitch Solutions forecasted lower prices due to weak market sentiment brought on by the trade war. Fitch said it expects copper prices to average $5,700 per metric Ton (mt) in 2020, down from $6,000/mt in 2019.

Agricultural commodities were also in positive territory following the upbeat trade sentiment. Among grains, soybeans ended the week 2.00% higher, closing Friday’s session at $9.08 per bushel; corn rose 1.20% on Friday, settling at a price of $3.81 per bushel; and wheat ended the week up 1.67%, closing the Friday session at a price of $5.33 per bushel. Other commodities were mostly higher:  sugar had a weekly increase of 2.04% and settled at a price of $0.14 per pound on Friday, and coffee was around $1.31 per pound at Friday’s close, up 4.68% for the week; cocoa was down 1.76% for the week and closed Friday’s session at $2,572 per tonne.

 

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Information Contact: Justin Hillstrom – 720.917.0770 Email: Justin.hillstrom@alpsinc.com, Website is www.uscfinvestments.com

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The SummerHaven Dynamic Commodity Index Total ReturnSM (SDCITR) is an index designed to reflect the performance of a portfolio of 14 commodity futures. The index is reformulated each month from 27 possible futures contracts. The 14 selected contracts are equally weighted and represent six sectors: Energy (WTI crude oil, Brent crude oil, natural gas, heating oil, gasoil, RBOB gasoline), Precious Metals (gold, silver, platinum), Industrial Metals (aluminum, copper, lead, nickel, tin, zinc), Grains (corn, soybeans, soybean meal, soybean oil, wheat), Livestock (live cattle, feeder cattle, lean hogs) and Softs (coffee, cocoa, cotton and sugar). One Cannot invest directly in an index.

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USO002079 Ex. 1/31/2020